The marginal cost of track renewals in the Swedish railway network: Using data to compare methods

We analyze the differences between corner solution and survival models in estimating the marginal cost of track renewals. Both approaches describe the renewal process in intuitively similar ways but have several methodological distinctions. Using Swedish data for the 1999–2016 period, results suggest the median marginal costs per gross ton-km from corner solution and survival models are SEK 0.0066 and SEK 0.0031, respectively. Since several European countries use information about marginal costs as a basis for track user charges, the choice of estimation method is obviously important. Our conclusion is that the corner solution model is more appropriate in this case, as this method considers the impact traffic has both on the probability of renewal and on the size of the renewal cost. The survival approach does not consider the latter as part of the estimations, which is problematic when we have systematic cost variations due to traffic and infrastructure characteristics.